Shocked that companies and mutual funds would invest OPM (Other People's Money) in high-risk investments, the Shocked Investor was originally on a mission to find out if our money ended up in these dubious instruments. This blog now also discusses other financial topics, such as straddles, options, gold, natural gas, agri/food stocks, and the collapse of the US Dollar.

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Monday, March 29, 2010

Canadian newspaper Ottawa Citizen reports today that Chinese investors are buying Canadian farmland, raising many concerns throughout the country.

The issue is Chinese' growing middle class. Hundreds of millions of people in China modified their eating habits and are consuming vastly larger quantities of meat and higher protein foods. There isn't simply enough arable land in China to meet this new demand. hence, the Chinese interest in fertilizers and agricultural lands (not to mention base metals and other materials).

In Canada, Quebec's agricultural producers union is making noise expressing concern that by Chinese buying large tracts of agricultural land in the province constitute a food security issue and that it may be related to a new international property speculation in agricultural land.

Both would drive up Quebec farm prices.

The report states that Canadian western farmers are also unreceptive to the Chinese interest in their lands, citing a firm called Monaxxion, which is looking to buy 40,000 hectares of land in Canada

Farmers are leery of Monaxxion.

"Sherbrooke's La Tribune newspaper reported Friday that a farmer in St. Clotildede Horton recently backed out of a tentative $30-million deal with Monaxxion after concluding the firm and its clients weren't as solid as he had been led to believe".

Te article mentions that fears are growing about the Chinese motives as "China has been investing heavily in agricultural land in Africa and other Third World nations. China has 20% of the world's population and an increasingly wealthy middle class"

"China has been actively seeking new supplies of food, hydrocarbons and other commodities on international markets.The country has been trying to buy into Canada's oil sands developments. It has reconfigured its foreign-aid programs to concentrate on helping countries such as Zambia that have rich copper deposits. And it has worked diligently to develop closer relationships with oil-rich countries such as Iran".

Daniel MercierGouin, a professor of agricultural economics with the Université Laval says there is no longer any doubt that the world is seeing the beginning of a speculative boom in agricultural land.

"To date, there have been plenty of inquires and even purchase offers by Monaxxion, but nothing really solid in terms of sales.However, Bergeron of Monaxxion says there are some important transactions being negotiated right now. And he said he plans to make his investors more open for public scrutiny".

Disclaimer. The writer owns shares of CRESUD, which own large areas of farmland in Argentina. The shares have done extremely well since late 2008.

But I don't understand. How come people from other country can buy land in Canada? So can we canadians buy land in China? I couldn't get it. If people from other country can simply buy the land in our territory, I mean, what's this? I mean who protects us? Where does our government go? And those who sold their lands to China, who allows you to sell your lands to citizens from another country?